Recently, Tesla's Stock Has Outperformed the S&P 500. Here’s What Could Drive More Gains.

When Tesla Inc. announces its delivery figures next week, the atmosphere on Wall Street may feel different compared to previous quarters. Historically, buy-side investors have often held a more pessimistic view than the sell-side consensus when it came to Tesla’s delivery expectations. However, this time around, the buy side is seemingly more optimistic, according to Barclays analyst Dan Levy.

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Despite investor expectations of Tesla beating its third-quarter delivery targets, such an outcome could still provide a boost to Tesla’s stock price, Levy said. Tesla’s shares have remained relatively flat for the year overall, but they have surged by 36% over the last three months, significantly outperforming the S&P 500’s 5% gain during the same period.

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Tesla’s stock rally has been particularly strong in recent days, with the company’s shares jumping almost 5% on Monday alone, making it the best performer in the S&P 500 by midday.

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Levy believes that a third-quarter delivery beat could further strengthen Tesla’s stock in anticipation of the company’s upcoming "Robotaxi Day." This event, expected to take place in October, will focus on Tesla’s advancements in autonomous taxi services. Levy explained that if Tesla’s delivery numbers exceed expectations, it could remind investors that, at least for the time being, concerns about the company’s core fundamentals have subsided.

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However, Levy cautioned that Tesla’s automotive business still faces several challenges. One of the key issues is a slowdown in Europe, partly driven by the expiration of some government subsidies that had previously supported electric vehicle (EV) sales. Nonetheless, there are also some positive developments for Tesla, including stronger-than-expected performance in China, which has shown "surprisingly robust" demand. Additionally, the ramp-up of Tesla’s Cybertruck in the U.S. has been better than expected, offering another bright spot for the company.

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Levy also pointed out an intriguing shift in Tesla’s approach to sales incentives. In previous quarters, Tesla had used various incentives to boost sales in response to macroeconomic pressures and a softening in consumer interest for electric vehicles. However, Tesla has not relied as heavily on incentives in the current quarter, which Levy finds notable.

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"We believe incentives have been a key factor in sustaining demand amid a range of macro headwinds and decreased consumer enthusiasm for EVs," Levy wrote. He also speculated that Tesla may still introduce additional incentives on a global scale toward the end of the month, if necessary. Levy suggested that Tesla’s management is likely highly motivated to meet or exceed third-quarter delivery expectations, especially with Robotaxi Day approaching.

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Levy himself is slightly more optimistic than the broader market consensus regarding Tesla’s third-quarter delivery figures. He estimates that Tesla will deliver 470,000 vehicles, slightly above the 461,000-unit consensus forecast from FactSet. Levy believes that if Tesla hits this target, the company would be on track for roughly flat delivery volumes for the entire year. To achieve this, Tesla would need to deliver a record 500,000 vehicles in the fourth quarter, a target Levy described as "likely achievable."

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In recent months, investors have shown a growing interest in Tesla’s future technology initiatives, such as its artificial intelligence and autonomy projects, rather than focusing solely on the company’s core automotive operations. This shift in investor attention is particularly evident in the buildup to Robotaxi Day. The event is expected to provide key updates on Tesla’s plans to develop autonomous taxi capabilities, which are seen as a major growth opportunity for the company in the long term.

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Overall, while Tesla continues to face some challenges in its automotive business, the combination of a potential delivery beat and the excitement surrounding its autonomous vehicle initiatives could keep investor sentiment positive in the near term. The stock’s recent rally suggests that expectations are high, and investors appear to be more focused on Tesla’s broader technological ambitions rather than short-term operational concerns.

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As Tesla gears up for Robotaxi Day and prepares to showcase its progress in the field of autonomous driving, the company’s ability to meet or exceed third-quarter delivery targets could serve as a strong catalyst for further stock price appreciation. With both the buy side and sell side appearing more optimistic this quarter, Tesla’s upcoming report could play a key role in shaping market sentiment for the remainder of the year.

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